USE OF VALUE CHAIN ANALYSIS TO
IMPROVE THE QUALITY OF HEALTH
SERVICE
Seror Naji Mohsen aldouri
College of Administration and Economics, University of Samarra, Iraq
seror.n.m@uosamarra.edu.iq
Manoj A. Kumbhalkar
Department of Mechanical Engineering, JSPM Narhe Technical Campus, Pune,
India
manoj.kumbhalkar@rediffmail.com - https://orcid.org/0000-0003-2289-6373
Reception: 27/11/2022 Acceptance: 20/01/2023 Publication: 05/02/2023
Suggested citation:
Seror Naji Mohsen Aldouri and Manoj A. Kumbhalkar. (2023). Use the Value
Chain Analysis to Improve the Quality of Health Service. 3C Empresa.
Investigación y pensamiento crítico, 12(1), 423-438. https://doi.org/
10.17993/3cemp.2023.120151.423-438
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ABSTRACT
Quality is currently one of the most important strategies adopted by WHO in to gain
time to please and deal with the client for the greatest possible benefit to auditors, In
health service, quality and value have become convergent ideas, and the importance
of patients as clients has grown as a result of a focus on quality management and
value delivery.The supply chain idea also aids marketing by showcasing the ties that
make up a network of firms that manufacture products for customers, as well as
shifting the attention away from individual transactions and toward a more holistic
view of the entire system. The value chain idea in marketing broadens the perception
of the supply chain in a significant way. It describes the value created at each level of
the chain and, for marketers, is a critical tool in satisfying customers for a portion of
the value chain. This research looks at numerous value approaches that are critical
for the value chain's success, then identifies key aspects of the value chain and
follows them as they relate to services. Finally, it looks at one of the most complicated
services, the health services system. Finally, the research reveals some crucial
implications for health-service marketers by evaluating the critical aspects determining
the performance of the health-service process.
KEYWORDS
Value Chain, Analysis, Quality Enhancement, Health Service
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PAPER INDEX
ABSTRACT
KEYWORDS
1. INTRODUCTION
2. INVESTIGATE THE VALUE CHAIN
2.1. THE CONCEPT "VALUE CHAIN ANALYSIS" HAS A LONG HISTORY
2.2. THE VALUE ANALYSIS CHAIN'S IDEA, GOALS, AND SIGNIFICANCE
2.2.1. VALUE CHAIN ANALYSIS AS A CONCEPT
2.2.2. VALUE CHAIN ANALYSIS OBJECTIVES
2.2.3. IMPORTANCE OF VALUE CHAIN ANALYSIS:
2.3. VALUE CHAIN ANALYSIS ACTIVITIES
2.3.1. THE MAIN ACTIVITIES ARE:
2.3.2. SUPPORT ACTIVITIES
2.4. VALUE CHAIN AND APPLICATION
3. THE VALUE CHAIN FOR HEALTH SERVICES
4. APPLICATION OF THE VALUE CHAIN FRAMEWORK FOR HEALTH
SERVICES
5. EFFECTS ON MARKETERS
6. CONCLUSIONS
ACKNOWLEDGMENTS
REFERENCES
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1. INTRODUCTION
Measuring beneficiary satisfaction with health service has become one of the most
significant indicators of service quality. These organizations now operate in a world
that is unquestionably marked by numerous challenges as a result of significant
developments associated with increased domestic, regional, and international
competitiveness, as well as the significant effects of modern technologies, which have
altered many of the issues associated with the management and functioning of
institutions in comparison to previous times.
In light of this, these institutions' management should be concerned about long-
term competitive strategy. In the area of strategic management of institutions, in
particular, the development and expansion of their use were initiated by Porter's
contributions as one of the leading researchers in this field, which were accompanied
by contemporary developments in the management sciences and business
management of enterprises in general.
Value chain analysis is an economic development strategy aimed at reducing
poverty by improving SMEs' integration into competitive markets. It provides a basis
for understanding the linkages between enterprises in a certain sector by looking at
the chain's performance or rationale and determining the circumstances under which
it might perform better. The series of transactions that move a product from the point
of origin to the end consumer is determined by the same value chain. The value chain
framework aids in the identification of services and solutions vital to an industry's
productivity and competitiveness, as well as helping micro, small, and medium
businesses to enhance the quality of their services, products, and overall productivity
(Kula & Farmer, 2004) As a result, the value chain analysis considers both macro and
micro issues, addressing policy restrictions to economic development, trade, and
competitiveness as well as domestic restraints encountered by businesses and
people.
The value chain for the manufacturing process is theoretically easier to define than
the value chain for the service process (Evans & Berman, 2001). The level of
customization supplied by the service, the degree of engagement of a partner or
consumer, and the uncertainty underlying the underlying process are all essential
elements to consider from a value chain viewpoint. Many of these aspects are backed
by formulae and metrics that allow for a degree of precision in the field of
industrialization. Because measurements are less precise in services, the value chain
of services might be more complicated.
This paper examines the critical factors affecting the success of the health service
process and focuses on one of the most complex services, the health service delivery
system. It describes the value chain of health services and describes the critical
factors affecting the success of the health service process. Finally, some major
implications for health service marketers are suggested.
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2. INVESTIGATE THE VALUE CHAIN
2.1. THE CONCEPT "VALUE CHAIN ANALYSIS" HAS A LONG
HISTORY
One of the terminologies used in business management to convey the chain of
actions that might help improve the value of final goods is the value chain.
Lawrence Mill coined the phrase Value Chain in the 1950s, and Porter expanded
on it in his publications, which focused on the search for sources of competitive
advantage and their origins by focusing on the performance of diverse operations at
the company level.
2.2. THE VALUE ANALYSIS CHAIN'S IDEA, GOALS, AND
SIGNIFICANCE
2.2.1. VALUE CHAIN ANALYSIS AS A CONCEPT
The value chain is a chain of activities that runs from the use of raw materials to the
delivery of the product to the final consumer (Porter & Millar, 1985).
They were defined by (Miles, 2015; Fard et al., 2013) as a comprehensive
approach for identifying and addressing variables that do not contribute effort or
expense to goods, processes, or services. This approach makes use of all available
technology, information, and abilities to quickly discover any expenditures and efforts
that aren't contributing to the client's needs and desires.
He said (K. L. Smith, 2000) that a giant organization that seeks likeness or
excellence in its work must guarantee the principle of doing too much (Doing more
with less), so it is a tool that helps us achieve that.
Describes (Ranjbaran & Moselhi, 2014) as a comprehensive mission to manage
problems: take alternative design objectives, cost estimation, and draft and
organization inappropriate selection criteria. Quantity methods are used and know-
based decisions to improve job satisfaction for owners with help reduce unnecessary
costs.
They are (the talents and resources necessary to carry out each of the
Organization's actions to supply products or offer services through marketing outlets),
according to (Day, 1999).
According to (Ansari et al., 1997), a value chain is the interaction of numerous
parties, including the processor, the organization's sections, the distributor, and all
those parties who offer value at various stages to the value chain's activities.
It can be said that according to the above definition, the value chain is a method or
analysis that entails examining all of an institution's internal and external activities, as
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well as organizing them by the organizational structure and the selection of effective
human resources.
2.2.2. VALUE CHAIN ANALYSIS OBJECTIVES
One of the objectives of the organizations' adoption of the value chain analysis
concept is:
1.
Improve quality by increasing the function of the product (the level of performance
the client receives from the product) while making resources stable (which are
considered raw materials, human resources, price, and time) or by lowering
resources while stabilizing the function, or by both enhancing the function and
reducing resources.
2.
They may be used to increase efficiency and find the optimal balance between the
cost, functionality, quality, dependability, and performance of a product or service,
as well as to finish processes as soon as possible without increasing costs or
lowering quality (Taghipour et al., 2015).
3.
Besides using them efficiently and logically with collective wisdom and experience,
they can reduce the potential risks involved in implementing a project (Kalluri &
Kodali, 2017).
4.
Identify the function of the product or service by determining the equivalent of this
function, find alternatives through creative thinking, provide required functions to
achieve the project's original objective, reliability, and at the lowest cost of life cycle
without compromising the project's quality, maintenance, conservation, or
environmental requirements.
5. Use all available technologies, information, and abilities to determine expenses and
efforts that aren't in line with the client's objectives and needs. "Their influence
makes it easier for perform better"(Carter & Price, 2017).
2.2.3. IMPORTANCE OF VALUE CHAIN ANALYSIS:
The following is a summary of the importance of value chain analysis (Bogale,
2013):
a) Reducing operational costs is aided by solving the value chain.
b) The analysis aids in the organization's performance planning.
c) Assists the organization in identifying chances to expand its work.
d)
Assists the organization in determining performance metrics for management
information systems.
e) Assists you in making better decisions.
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2.3. VALUE CHAIN ANALYSIS ACTIVITIES
2.3.1. THE MAIN ACTIVITIES ARE:
a)
Input: This includes the processing of raw materials, inspecting and storing raw
materials as well as receiving and storing materials, inventory control, and
distribution of inputs used in the manufacture of goods or the provision of services.
b)
Production Operations: Are concerned with quality, cost, consumable services,
delivery, and reaction time. Production processes encompass the acquisition,
design, and operation of machinery, as well as the control of production (Foss &
Robertson, 2007).
c) Output: Many operations entail distribution, companies rely on brokers to dispose of
their goods or sell them to consumers. Distribution systems are a critical component
of an organization's resources. that must be handled, and a distribution strategy
connected with the selection and determination of distribution channels is required
(Hitt et al., 2016).
d)
Marketing and selling: Marketing is a significant activity that contributes to
understanding consumer wants or uncovering new marketing possibilities, as well
as aiming to establish a balance between market needs and the organization's
capabilities and hence the organization's competitive advantage (Mohamad &
Bakar, 2018).
e)
Service: It includes after-sales services such as maintenance and client delivery.
According to the researcher, distribution is intended to be a component of marketing
and selling.
2.3.2. SUPPORT ACTIVITIES
a)
The buying department is in charge of supplying raw materials and equipment to
the company required for the manufacturing process, and the Purchasing
Department must have a high capacity in order to achieve maximum benefit from
cost reduction while maintaining the quality components of the good or service.
b)
Technology development: Refers to all actions aimed at improving production
techniques and complying to total quality standards and new ISO systems that
need the use of computers in the job to be done (Forcht, 1996).
c)
Human Resource Management: Active employees are the human resources that
the organization’s management has to pay great attention to because they are
largely reflected in its activities.
d) The organizational fundamental structure is made up of all organizational levels that
are responsible for carrying out the organization's numerous duties, such as public
administration, strategic planning, accounting, legal affairs, public relations, and
industrial security. As a result, all of the organizational structure's contents are
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compatible with the organization's core thinking qualities, which may be updated
and altered in response to developments and changes.
2.4. VALUE CHAIN AND APPLICATION
The value chain framework attempts to overcome limitations by identifying the
many entry points and links in the production or supply chain, allowing SMEs to take
advantage of the full range of activities needed to change a product or service from
concept to end use, including design. While production, marketing, distribution and
delivery to the final consumer can be contained within one large firm in an economy
with few cross-border transactions and dispersed production inputs and assets, they
are more likely to be shared by specialized firms of different sizes and cost structures
operating in different locations.
The competitiveness and growth of a company, as well as the strength of the whole
industry chain, are determined by how it participates in the industry's production
process. This strength is defined by two types of corporate ties, vertical and
horizontal, according to the literature on value chains. Vertical linkages are at the
heart of every manufacturing process, connecting providers of inputs, producers,
retailers and distributors of a certain service or product.The value chain's fundamental
skills are defined by these linkages. Collateral linkages are frequently associated,
lowering overall efficiency and transaction costs. Individual organizations can be
included in the network, and commercial service providers can be partnered with to
obtain economies of scale.
3. THE VALUE CHAIN FOR HEALTH SERVICES
Health services are a market with many similarities to traditional markets, such as
market segments that can be identified by common characteristics, they also have
clients and patients, and similar problems, such as increased customer identification
and governance structures that are revenue and cost conscious, implying that the
health service does not differ and should not differ in its interest in customer
satisfaction.
By mapping and responding to the restrictions and possibilities presented by health
care institutions in specific markets, value chain analysis may be used to improve
health sector efficiency. In developing nations, the size and complexity of the health
sector is expanding, and health sector reforms and cuts to the government's health
budget have resulted in a greater role for private health in the delivery of health
services (E. Smith et al., 2001). In this setting, public health practitioners and the
donor community must work to improve access and quality of services.
The interactions between diverse service providers, product suppliers,
manufacturers, policymakers, government agencies, and customers show the
intricacies of the health industry. The formulation of plans to improve sector growth
and raise demand for health services and goods requires sector-wide analyses of
health care delivery and product distribution. The value chain framework might be
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used for this purpose, serving as a tool for identifying supply chain bottlenecks in the
health sector and leveraging synergies among service providers, professional
organizations, manufacturers, distributors, and other stakeholders. Figure 1 depicts
the health value chain scheme.
Figure 1. Health services value chain for products and services
Figure 2 depicts some of the players in the health services value chain who link the
many stakeholders in the health services system as a model of the health services
value chain. These value chains must be understood to be non-linear, non-
continuous, periodic, and recurring. The flow of information is usually governed by a
specialized communication network among many parties. The value chain will be
damaged or interrupted if communication is stopped, information sent is delayed, or
worse, fraudulent information is sent, placing one or more players at risk. Patients
(and their health) are the most vulnerable, but other parties may suffer reputational
harm or face litigation directly.
The shortest value chain of patients and their interactions with health professionals
or physicians is formed by the initial participants. Patients often begin the exchange
procedure and obtain the anticipated health advantages at the conclusion. They prefer
to share essential information with their doctor, especially if they believe it will help the
doctor make the best diagnosis possible. Sharing information entails confidence that
the doctor will protect the information's integrity and that the exposed patient will
utilize it for the intended purpose. Another crucial part of this information sharing is the
patient's trust in the accuracy and relevance of the information presented. Patients
may provide information and describe symptoms that are unrelated to the patient's
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current problem, which can cause confusion rather than help a doctor. Assuming that
they have the correct information from their patients, health providers must first make
the correct diagnosis and then develop the treatment plan, thus contributing to the
value chain. Figure 2 shows the first and second numbers in the series.
Figure 2. The health service value chain's relationships
In many cases, a diagnosis includes a treatment plan, which includes a
prescription, as well as the pharmacist's dose schedule, which includes doses and
other pertinent information; the pharmacist may or may not be aware of the patient's
other medications, and it is possible that the last prescription will be filled. Pharmacies
are an obvious entry point within the value chain and introduce a new variable. Figure
2 shows the expanded value chain in figures 1, 2, and 3.
By asking patients for extra information or offering a mechanism for patients to
contribute further information, a third value chain is created, even if the patient offers a
correct description of their symptoms. Additional material may include a description of
a diagnostic test. Once this diagnostic test is detailed, more participants enter the
process. Naturally, they should be aware of the expectations placed on them and
aware of the need of obtaining accurate information about their role in the value chain.
Medical laboratories, equipment makers, and diagnostic providers are now part of the
value chain.
Suppliers of inclusivity are another possible value chain, as described above. An
increasing number of alternative health services professionals, such as acupuncturists
and herbalists, have recently entered the value chain. There may be four to seven
actors in the new value chain, and information is passed back and forth frequently in
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sequence. One or more actors, such as those depicted in figure 2a, 2b, or 2c, have
now been added to the value chain (2).
In addition to serving as major repository of medical records, hospitals have a
considerable impact on the value chain because of the involvement of patients.
Fourth-generation health service delivery chains revolve around patients, just way
products do as they travel up and down value chains. Patients' health and
responsiveness to therapy are heavily influenced by the value chain, which currently
includes numbers 1 to 4 in figure 2 A new categories of health care services is created
as a result of this value chain.
A new link was added to the value chain with the development of health insurance
in the late 1800s. The availability of resources, affordability, and insurance
theoretically adds a lot to the value chain. They also need access to formerly
confidential information. Before paying for a test ordered by a medical professional,
the insurance company, for example, could ask for diagnostic information. Procedures
that are too complicated may be denied by insurers who prefer to utilize simpler
methods to examine a problem. Figure 2 shows that the value chain now includes
numbers 1 to 5.
Employees and their families in the United States have access to health insurance
through their workplace and a collective bargaining agreement, which is generally the
product of talks between the employee's firm and the insurance carrier. In this way,
huge corporations may be able to get better terms for themselves, such as reduced
premiums or greater coverage for their employees. When it comes to employee
benefits, it's all part of an overall strategy of equalizing the risks. Refusing to cover
employees who are qualified for benefits is almost never an option. Numbers 1 to 6
have been added to the sixth value series of health services shown in figure 2.
The capacity to pay out of pocket for health services promotes the idea of
everlasting value for health service providers as a result of insurance interference in
health care transactions. All insured people who do not register health service
providers in their insurance schemes fall under this group, regardless of whether or
not they are uninsured. Consumption is considered as a way for customers to make
their own choices, which might possibly shorten the value chain while also altering its
overall structure.
Affordability may have a role in a variety of factors, including health service
demands and the appropriateness of different providers. Figure 2 shows the impact
on the value chain of a patient's inability to pay for or need to find a lower-cost
medication prescribed by their doctor, which we classify as a third variable in the value
chain.
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4. APPLICATION OF THE VALUE CHAIN FRAMEWORK
FOR HEALTH SERVICES
With this value chain method, it is possible to discover various aspects of the health
service market and identify prospective areas where public health care services and
products might be strengthened.
1. One of the best ways for small businesses to achieve a competitive edge is by
improving their overall efficiency and quality of service. There have been
technological advances as well as advancements in the clinical capabilities of
medical facilities.
Health service providers can boost their competitiveness and productivity by
boosting service quality and stock or decreasing operational expenses. Smaller
healthcare providers can boost productivity by offering a wider range of
services, such as specialized therapeutic or diagnostic care. Large health
service providers can instead create expensive laboratories in order to
continue internalization services.
2. Horizontal links guarantee that small businesses collaborate to cut transaction
costs and benefit from economies of scale.
Individual service providers can benefit from economies of scale and easier
access to training and supplementary services, such as loans, business
development, or marketing, when structured into subsidiaries or networks. It is
possible for the network to have a variety of service providers, depending on
the situation. Small businesses can benefit from referrals between professional
service providers, such as retail pharmacies and midwifery clinics, in order to
guarantee that consumers are aware of respected service providers and have
easy access to a high-quality package of health service. A unified procurement
agreement might be used to recruit high-quality manufacturers into the supply
chain through the network.
3.
The use of vertical connections is critical in fostering growth by increasing
efficiency and enhancing a company's ability to compete. A direct link between
input supply and ultimate consumer markets is shown by these links, which
may be restricted to domestic boundaries or linked to global markets
Connections between various sorts of health care institutions. Relationships
between various professional service providers, such as laboratory or
diagnostic services, which are directly integrated into the supply chain, should
be reinforced to increase overall supply chain efficiency.
4. In many developing nations, the existing market for support services will have a
significant impact on the strength of the value chain of health service.
Small and medium-sized enterprises (SMEs) must have access to financial
services, cutting-edge technology, and information on clinical and other health
training in order to keep up with the times and remain competitive.
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An major element in increasing the usage of preventative service is the health
insurance market. Consumers who are unwilling to pay for preventative
treatments up front may be reluctant to pay service providers to deliver those
services as part of ad hoc programs. The employer or the business sector
contributes to private patient funds. Some of the strategies to stimulate the use
and supply of health service include national insurance schemes and
community risk-sharing partnerships with providers.
5.
The engagement of governments and donors in policy formation and
formulation is essential to establish an enabling climate for the supply of health
service.
Individual health service providers, whether small businesses or major
hospitals, must enhance the quality of their health services in order to adopt
and control health quality standards. By offering training and clinical
assistance, national standards may be a stimulus for local market development
organizations.
Private health service providers, large and small, must be encouraged to
participate in the delivery of services by the larger policy environment. For
example, private health insurance subsidies and contracts with private
providers within the national health insurance plan can serve as methods for
licensing and regulating the operations of health services.
As a result, the health sector will be constrained in its expansion and may need
to enter into joint ventures with public producers in order to boost supply and
lower prices for end users. The reduction of import duties or the negotiation of
long-term agreements with certain pharmaceutical businesses might serve as
incentives to foster collaboration between these nations and regional
manufacturers in countries where drug makers do not have a local market.
6.
Demand generating strategies must be institutionally connected to their
provision in order to enhance the final market potential. Demand and service
delivery are interdependent, and demand generation strategies must be linked
to their provision.
Partnerships with a wide range of stakeholders might include: Preventive
health services can be promoted by the public sector, major enterprises,
schools, community organizations, and so on. For the purpose of boosting their
market share, commercial pharmaceutical corporations might team up with
non-governmental organizations (NGOs) to conduct educational programs
targeted at certain consumer groups.
Funding strategies based on need: In order to entice clients who are less
inclined or who have a tight budget, targeted vouchers or savings-based micro-
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insurance products might be employed. There will be a rise in demand for other
types of insurance and risk-sharing systems that are based on the private
sector or employers.
Increase demand for preventative health service by offering urgently required
services provided by small service providers. Providers of these diagnostic and
therapeutic services make more money.
5. EFFECTS ON MARKETERS
While the value chain is built on the notion of a supply chain, this study investigates
how value is produced for the final consumer at each point along the way.
Business components, such as the value delivery network, and consumer business
components, which complement the value chain, are recognized as distinct in the
value chain idea. That value chains will compete with others and that members of the
value chain must shift away from transaction models and recognize that their well-
being resides in a successful value chain.
For enterprises that want to develop a value chain for health services, each
member of the service chain must be carefully selected and evaluated. The whole
value delivery network and patient outcomes are impacted when a value chain
component fails. As a result of an incorrect diagnosis or operation, the health care
delivery system will suffer greatly.
To ensure the success of the series as a whole, each member must achieve on his
or her own while also contributing to the success of the group as a whole. This, for
example, will improve the efficiency of the value chain and raise the perceived value
of customers.
The long-term success of the chain is more important than the short-term success
of a single transaction for organizations who want to maximize their own interests.
Clearly, the argument that everyone should win is a waste of time. Instead, they
should put their money into things that they both care about. More efficient health-care
value chains will benefit from stronger government and third-party cost management,
while those that lack efficiency and efficacy will eventually perish.
Enterprises must express their efforts to avoid difficulties before they become
problems in order to avoid being blamed by consumers for unforeseen issues that
hamper the success of their services. Reorganization of the workplace or medical
facility may be necessary in some circumstances in order to accommodate this sort of
engagement. Organizational value and the perception of value can be supported by
patient representative concepts in hospitals.
Value chain organizations are critical to the service's success. There are several
factors to consider when deciding which organizations should be given the most
attention by marketers. Previously key partners may become less significant as the
value chain develops.
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The first step in maximizing earnings for health providers is to estimate the worth of
the patient. Following their initial treatment, some patients may be sent for more
expensive options including fitness and health training, physiotherapy, or even
cosmetic surgery. Patients like these must be prioritized as appointment candidates in
order to safeguard and preserve the lives of the most important patients.
6. CONCLUSIONS
This case study shows how the value chain concept can be used in a health
service setting. It benefits health service managers because it requires them to
disaggregate their health service function and evaluate its efficacy, as well as to
identify alternate strategies for obtaining present results and consider future
possibilities. Value chain analysis allows for an intra- and inter-organizational
examination of resource application costs, which motivates both medical staff and
management to consider alternate techniques and structures for accomplishing goals.
This research yielded a lot of options and opportunities. The idea of employing staff
abilities to propose preventative measures to industry and the wider community was
considered, as was the possibility of expanding collaboration arrangements.
ACKNOWLEDGMENTS
The author wishes to express gratitude to the University of Samarra, College of
Administration and Economics, for supporting them in completing this paper.
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